Benchmark Tariff

Wind bids stabilise at the sub-Rs 2.50 level

Solar Energy Corporation of India’s (SECI) latest wind project auction of 2,000 MW interstate transmission system (ISTS)-connected capacity, the largest so far in the country, attracted the lowest winning bid of Rs 2.44 per kWh from ReNew Power, Green Infra Limited, Torrent Power Limited and Inox Wind Limited, and the second lowest winning bid of Rs 2.45 per kWh from Adani Green Energy, Alfanar Energy and Betam Wind Energy (ENGIE).

Of these, Torrent Power, which forayed into the renewable energy space with up to 50 MW wind power plant in 2012 and has so far implemented wind and solar power projects aggregating around 436 MW, has won the highest quantum of 499.8 MW. An integrated power utility with presence across all facets of the power value chain, that is, generation, transmission and distribution of power, Torrent Power’s wind win is a positive signal for the wind power segment in general. Meanwhile, Betam, which is a part of the French multinational electric utility company ENGIE, was the last successful bidder in the auction, as it placed a bid of Rs 2.45 per kWh for 250 MW of capacity. However, it will be awarded a capacity of only 50.2 MW to develop. If it does not wish to develop this capacity, SECI will go ahead with the implementation of the remaining 1,949.8 MW. Other participants, which did not make the cut, were Sprng Energy, which had bid Rs 2.45 per kWh for 300 MW capacity; BLP Energy, which had bid Rs 2.50 per kWh for 300 MW capacity; and Orange Wind Power, which had bid Rs 2.65 per kWh for 100 MW capacity.

The auction underscores the growing investor interest in wind energy projects as the cost of turbine generators declines, leading to low wind tariffs. The plummeting tariffs are a function of the existing policies, and regulatory, market, technological, financial and demand factors, along with the bidding structure that the procurer provides. The final bid band, which ranged from Rs 2.44 per kWh to Rs 2.65 per kWh, irrespective of who won, indicates that there are no outliers and the wind industry is reaching a consensus on the sub-Rs 2.50 per kWh tariff.

Wind power tariffs plummeted to a record low of Rs 2.43 per kWh at an auction conducted by Gujarat Urja Vikas Nigam Limited (GUVNL) in December 2017, beating the record low solar tariff of Rs 2.44 per unit registered in May 2017 under SECI’s Tranche II – 1 GW auction.

Close on the heels of these results, SECI has released a request for selection (RfS) document, seeking bids for the development of another 2 GW of wind projects. This will be SECI’s fourth auction for ISTS-connected wind projects, after two tenders of 1 GW each and the recently concluded 2 GW auction. The latest RfS sets a cap of Rs 2.93 per kWh for tariffs under the tender. Projects should be between 50 MW and 300 MW in size, with individual bidders allowed to bid for up to 300 MW each. Acquiring land, permissions and other infrastructure to connect the upcoming wind projects to the electricity grid would be the responsibility of the developer. The bid submission deadline is March 7, 2018, and successful applicants will sign 25-year power purchase agreements (PPAs) with SECI. Like in the case of previous tenders, these projects will also be developed on a build-own-operate basis, and the time frame for the commissioning of the project has been set at 18 months from the effective date of the PPA.

In November 2017, the government announced the break-up of its action plan for completing 28 GW of wind auctions by 2019-20, leaving a margin of two years to complete the projects by 2022. At the current pace of project allocation by SECI and with the state nodal agencies catching up fast in their wind project tendering processes, the government is likely to meet the allocation target. The domestic wind industry, therefore, is quite positive that the government’s auction plans will allow it to regain momentum after the hit during the transition to the auction regime.